Wine industry thriving despite labor, grape shortages

Despite a significant, long-term shortage of grapes and economic pressures that are putting the squeeze on profit margins, two surveys recently conducted by the University of California at Davis reveal that wine industry leaders are cautiously optimistic about the future.

Findings from the surveys of wine executives and winemakers were presented last month at the Wine Industry Financial Symposium in Napa.

"Industry leaders agree that while the somewhat giddy wine-buying days of 2006 and 2007 are not likely to return in the near future, there remains a strong and growing consumer base for California wines," said Robert Smiley, an emeritus professor and former dean of the UC Davis Graduate School of Management.

Smiley has surveyed wine executives for each of the last 11 years and winemakers for 21 years.

"This fall's harvest of California wine grape appears to be strong, but it will not make up for several years of shortfall," Smiley said.

Most of the survey participants noted that they are dealing with a grape shortage resulting from a growth in demand for wine that has not been matched by establishment of new vineyards or replanting of aging vines.

As a result, the wine producers are paying higher prices for grapes, establishing or extending contracts with grape growers, and buying grapes from other countries.

They also are using grapes from broader appellations -- buying fruit from vineyards beyond the most premium areas for specific wine-grape varieties. And they are planting new vineyards.

As wine-grape prices and other operating costs climb, the wine producers are being hit from the other side by wine prices that remain stagnant.

Furthermore, many of the wine executives said their firms are struggling with a shortage of vineyard laborers, noting that there are fewer people in the farm labor pool. When harvest of other crops in the region overlaps with wine-grape harvest, growers often find themselves scrambling for field workers.

To deal with the labor shortage, many survey respondents said they are increasing wages and benefits to attract employees, using labor contractors, and increasing their use of mechanization for harvesting.

Meanwhile, the wine professionals said that social media played a moderately important role in their own businesses. Most cited Facebook, followed by Twitter, company blogs and LinkedIn, as their preferred social media tools.

The wine professionals predicted that during the next three years the strongest demand among red wines would be for Cabernet Sauvignon, Pinot Noir and red blends. Among white wines, they predict that the greatest consumer demand will be for Chardonnay, Muscat and Sauvignon Blanc, followed very closely by Pinot Grigio.

They expect to see the strongest growth in sales among wines in the $10 to $14 and $14 to $20 price ranges.